WSM's portfolio end March 2024

End March portfolio

My YTD return per month of this year was as follows:
Jan +1.4%
Feb +17.6%
Mar +17.4%

It looks like I’ve been quite active in the year, but my core positions were on the scoreboard for the full year. I had a number of smaller “question mark” positions which had to prove that they belonged in the portfolio, mainly by qualifying with accelerating growth, and most of them didn’t make the bar. That’s why I exited my test positions in Pure Storage, Dlocal and Shift4. In hindsight I probably should have kept those positions smaller.

I sold Nvidia last week, and I’m probably in the minority here, but this is now the third most valuable company in the world at more than $2 trillion, second only to Microsoft and Apple (both with incredible recurring revenue streams); more valuable than Saudi Aramco (ditto) and more than double Berkshire Hathaway (ditto). And the vast majority of Nvidia’s revenues are of a non-recurring nature. Selling things: datacenter kit - and ultimately cyclical in nature. Do I see it doubling or even going up by 50% (i.e. increasing by $1 trillion!!!) from here? No. I know others do, and I hope it’s a good investment for them but I just don’t see it.

I am aiming to give a bigger weighting to faster-growing companies in my portfolio, as I believe that growth may be under-priced at the moment:

Source: The Rule of X - Bessemer Venture Partners

I’m ahead of the indexes so I’m happy.

Comments on the companies in my portfolio

Below I’ll comment briefly on each company and why I own it, and the YTD move of the company (so not my return), and a rule of 40 calculated on (adjusted) operating margin.

Axon (+21.1% YTD) Axon just grew 29% in the last quarter and delivered a 21% operating margin for a rule of 40 of 50. NRR stayed stable at 122%. The company is as solid as they come imo. They are dominant in their market and have a very fast-growing software/IoT business under the hood, that is becoming ever larger as a proportion of total revenue. Cloud revenue grew at 44% and is now 38% of total revenue. But a key reason that this is my top position are the forward-looking metrics. ARR grew 47% and their already huge RPO grew 54%. That’s a nice “but there’s more” story to me: Revenue grew nicely at just below 30%, cloud revenue grew much faster, ARR grew faster than Cloud, and RPO faster than ARR.

ELF (+35.8% YTD) ELF just grew revenue 85% and delivered 12% operating margins for a rule of 40 of 97. I know it’s not SaaS, but who made the rule that you can’t measure companies using the same measuring tape. This is an asset-light company growing like weeds and I’m very happy to have this as a top position. If growth were to be given a higher weighting (say 2x or 3x) vs margin/profitability, then this company is one of the very best ideas out there imo.

Transmedics (-6.3% YTD) They just grew 159% yoy with a 3% operating margin, for a rule of 40 of 162. If growth was weighed more then this would be the best “rule of x” company that I could find - I would be ecstatic if someone could point to another one out there. They gave an extremely confident earnings presentation and seem to be accelerating their logistics plans. I really cannot find fault here, and don’t understand people’s hesitancy on the stock. The business is predictable, they have a very strong moat and top-notch leadership who know the industry backwards. Given that growth is what I am looking for, this is one of my top positions. I built this position up, given that the stock has underperformed YTD.

Monday (+20.3% YTD) Revenue grew 35% with operating margins of 10% for a rule of 40 of 45. Very steady and impressive improvement of all margins over time, and with a multi-product approach that is starting to gain traction. The big kicker for me in their latest ER was their >50k ARR customers (a forward-looking metric) which grew by 56%, and in absolute number of customers was a quarterly record at +218 customers.

Snowflake (-18.8% YTD) Snowflake has been a big drag on my portfolio and the drop after results and the news of Slootman leaving of course didn’t help. Revenue grew 32%, operating margin was 9% for a rule of 40 of 41. I decided to increase my position after results. I believe that they are setting up the new CEO for success (who has great credentials and is the right person for the job at this point in time imo). The guidance took all the possible bad news on the nose but didn’t incorporate any of the potential good news. The stock is still relatively (ok very) expensive but at the current $161 we’re getting closer to the price that Buffett paid before IPO three years ago ($120 if memory serves). They have a huge number of the very largest companies on earth as customers and I just cannot see them fumbling the ball at those customers, in fact I can see them leveraging that to their advantage. I may increase my position further.

Celsius (+52.1% YTD) They just grew revenue by 95% and came in with an operating margin of 19% for a rule of 40 of 114. If we weigh growth more, then this company, together with ELF and Transmedics are the top ones in my portfolio. Recent Nielsen tracked channel volume growth estimates came in at 75% yoy and price increases at 4.7% for a total of 80% yoy in tracked channels - i.e. only some of the routes to market. Given that analysts seem to expect revenue growth to drop off a cliff for them (consensus if for 51% in Q1 dropping to 36% in Q4) even as they announced further international expansion to Australia and the UK and the US is firing on all cylinders, I’ll be looking to increase my position to a top one in the days ahead.

Samsara (+13.2% YTD) grew revenue by 37% (48% including the extra week) and delivered an operating margin of 5% for a rule of 40 of 42 and with a 120% NRR. All numbers impressed. All margins improved, ARR grew 39% and customers with >100k of ARR by 49% and those with >$1m by 61%. Extremely impressive. So why did I trim? Well, that extra week tbh (remember they have a funny year-end which adds a week to their Q4 every couple of years including the just reported one). Every metric for a growing company with improving margins will look better if you throw in an extra week of business. They told us how much of the revenue growth was due to the extra week, but not the other metrics. ARR will look better, customers with >x ARR will look better, NRR will look better as it’s based on ARR, margin growth will look better. So I worry a bit about the upcoming Q1. Will the market be disappointed due to the quarter simply having the right number of weeks vs the previous one that had a week too many? I suspect so. So I won’t be increasing this one too much; I may even reduce it somewhat.

Remitly (+6.8% YTD) grew revenue 43% and delivered a 4% operating margin for a rule of 40 of 47%. But they have a bit of a problem: their cash flows from operating activities fluctuate and was again negative in the last quarter after briefly going positive the quarter before. I reached out to their IR department about their cash flow profile but they have not yet bothered to answer me. Here is what I wrote to IR. I framed the question as trying to understand their free cash flow profile, and specifically the impact that their disbursement prefunding and customer funds receivable have on their cash flows. They seem to have painted these as simply timing matters in prior ER’s but it seems to me that it is part of their business model. This is an extract from my (still unanswered) mail to their IR (I’m quoting their CFO below):

The recent comments around this topic that I could find were as follows:

  • Q2 2023: “It is important to note that our cash and working capital balance at the end of the second quarter was impacted by timing as the last day of the quarter was on a Friday ahead of a multi-holiday weekend. We generally have higher prefunding amounts reflect in our balance sheet if the quarter closes before a weekend or in advance for a long weekend such as a holiday. This creates variability in customer transaction related balances period-over-period and can temporarily reduce our cash position at a particular point in time.”

  • Q3 2023: “Similar to last quarter our reported cash balance as of September 30, was impacted by timing as the quarter ended on a weekend, when we typically have higher prefunding requirements to ensure funds are available to our customers.”

It would seem that the comments indicate that timing is largely responsible for swings in in-quarter cash flows.

I have calculated the quarterly impact per quarter of the two lines in the cash flow statement of “Disbursement prefunding” and “Customer funds receivable” as follows:

Combined $m Q1 Q2 Q3 Q4
2022 48 -117.8 -18.6 -76.9
2023 25.5 -89.2 -63 -88.5

→ Therefore it would seem that there is an outflow from disbursement prefunding and customer funds receivable which is inherent in your business model and not only a temporary phenomenon as it happens in all quarters except Q1 of your financial year.

My question is whether there are other publicly available commentary that you have disclosed around this matter in the past, and whether my conclusion above is correct.

I think this is still a worthy company to have in the portfolio, but I do want to understand their cash flow better before concluding on that. I will keep it small until they either decide to answer me or an analyst asks the question and has it answered in an ER.

Aspen Aerogels (+11.5% YTD) Revenue grew by 41% in the last quarter and adjusted EBITDA was 11% for a rule of 40 of 52. This company sells things (thermal barriers), is capital intensive (they have factories) and the gross margin is relatively low at 35%. So why am I interested? I think this stock could triple or more in the next years if all goes according to plan. And that seems to be the case. They have years of R&D and patents as a moat, a relatively stable business selling to large industrial customers, and a new exciting piece of business. The big driver of their growth has been a relatively new part of their business which sells thermal barrier material to EV and hybrid auto manufacturers (not Tesla). Without doing a deepdive, here are some of the numbers that have me excited.

Revenue ramp of their thermal barrier business (to the likes of Ford):

Thermal Barrier $m Q1 Q2 Q3 Q4
2021 1.0 5.7
2022 8.0 11.0 12.0 25.0
2023 11.7 12.6 32.8 52.9

Yoy this is what that growth translates into:

Thermal Barrier $m Q1 Q2 Q3 Q4
2022 1100% 339%
2023 46% 15% 173% 112%

Thermal barrier revenue was 68% of total revenue in Q4.

And margins are rapidly improving:

GP % Q1 Q2 Q3 Q4
2021 14.1% 14.5% 10.1% -5.3%
2022 -4.7% -2.7% -17.3% 24.1%
2023 11.2% 17.5% 22.7% 35.0%
Adj EBITDA % Q1 Q2 Q3 Q4
2021 -9% -11% -26% -39%
2022 -38% -40% -63% -8%
2023 -30% -22% -12% 11%

→ Adjusted EBITDA turned positive for the first time in 3 years last quarter.

It’s valued at 4 times run-rate sales and 17.6 times run-rate GP. I find it a very interesting company to keep watching. If they continue to execute, this could turn out really well.

And that’s it from me. Hope you all have a good Easter weekend.


Previous reviews

Dec 2023 full-year
Dec 2022 full-year
Dec 2021 full-year
Dec 2020 full-year


@wpr101 inspired me to also list some of the companies that I briefly looked at during the past couple of months but that are not in my portfolio, to inspire some debate.

Hims & Hers Health HIMS - Company is a telehealth and an online purveyor of medicine company. It has grown exceptionally fast, and seems to be accelerating. Revenue went from $26.7m in 2018 to $872m in 2023 and gross margins from 29% to 82%. Operating margin has been improving of late but is still marginally negative. I see some people own it and I’m interested in learning more.

Ouster Robotics OUST - The company is a maker of Lidar equipment. Revenue has grown from $1.3m revenue in 2018 to 83.3m in 2023, with the latest two years clocing in at 22.2% and 103% revenue growth, respectively. Gross profit is very low, coming in at 10% in 2023 and 26.7% in 2022, so the operating margin is way, way underwater. Interesting growth inflection, but not sure about the path to profitability.

Mercado Libre MELI what a great company and a top pick for many. The Amazon of South America. They just grew revenue 37.5% in the last financial year in usd, and they don’t guide. P/E is 79. Fwd PE is 47x based on 43% growth in EPS and revenue growth of 22% in 2024. However a 22% growth next year would be a big slowdown. Given that Argentina is 25% of MELI’s revenue and that country has had a number of big economic shocks which will likely negatively impact MELI’s growth rate, I am not sure about entering this one at this stage. Specifically if the analysts are right and revenue growth is going to slow to the extent that they seem to anticipate. As a counter, I wonder if the basket of currencies that make up MELI’s business could perhaps strengthen in the year ahead if interest rates in USD comes down, which will boost MELI’s revenues (vs the drag of the last couple of years).

Nubank NU Extremely impressive outfit. I really like the CEO, and this interview is a very worthy watch for those interested: Fireside Chat with David Velez: Nubank’s Decade of Innovation . Revenue went from $154.9m in 2018 to $3,706.8m in 2023. Total revenues were up 101.5% in 2023. But, it’s a bank. And banks are weird monsters where the numbers are basically all one big estimate (imho). If one looks at that growth of theirs in the last year, the commission and fee part grew only 28.5% while net interest income exploded by 119.3%. I.e. making money from loans (mainly to consumers). And provisions for loan losses (a massive estimate which for banks can turn out completely differently) boosted their revenue growth this year (from 84.7% to 101.5%). Operating income turned positive last year for the first time in the last 5 years and exploded to $1.5bn in 2023 which resulted in their first positive net income in the same period. Total assets have similarly exploded from $29.9bn last year to $43.3bn end 2023. If the assumptions about repayments are off by only a teensy weensy bit, those loan loss provisions can wipe out all profits and then some. Anyhow, that’s a cursory look but enough for me to say: interesting company with great leadership. But it’s a bank, and banks are by their very nature risky businesses. Not sure that I can handicap the quality of that $43bn assets of theirs enough to take a view on this one…maybe someone on the board can.

Pagaya PGY Man what an interesting company. It is Upstart but then with the models not going haywire, with leadership from the industry (instead of outsiders trying to learn banking), with many, many more bank partners and without the company having to retain as much of the loans on the balance sheet. The company seems on target to deliver on an impressive growth target for the coming year and is valued as if left for dead. Revenue went from $32.3m in 2019 to $772.8m in 2023 and gross margins from 22.6% to 37.3% in the same period. But in 2020 and 2021 GM% was as high as 51%, so that’s where it could eventually get to. They managed to get to close to positive operating margins last year (-3%) and got to 5% operating margin in the last quarter of 2023. They’ve promised to get to about $1bn in revenue (+23%) in 2024, to double adjusted EBITDA to $180m, remain operating cash flow positive and to get to total cash flow positivity by early 2025. Valuation is at less than 1x revenue…if the interest rate environment were to improve in the US, Pagaya could do exceptionally well.

That’s it from me! If anyone has looked at the companies above in more detail and have strong views about them, please shoot.



Regarding $PGY

There is a seekingalpha article with (IMO) a very well thought out and well-defended thesis.
But even better are the 300+ comments that go into absolutely gory detail about the specifics of $PGY’s loan vintages, their cash dynamics, and a (IMO) really good consensus that

  1. Not all is what it seems with $PGY (…for better AND for worse)
  2. $PGY currently faces a thread-the-needle situation of (mostly) their own making.

No position in $PGY, but I’m monitoring.
I think that they’ve grown well in the past, but I don’t see evidence that they’ll continue with hypergrowth.


Regarding $MELI

I have what for me is a medium-sized position in $MELI and I’m trying to find the time for a full writeup.

Here, in random order, are some of the main ideas I’d like most to convey regarding $MELI:

  1. $MELI is a Fintech that has a ecommerce site, not the other way around, as demonstrated by their revenue buckets and how each bucket is growing.
  2. Revenues from credit card transactions (…that have nothing to do with are TRIPLE the revenues they make from transactions on
  3. $MELI’s Credit Card (Mercado Pago) vision is to provide ALL the services in a credit card transaction. In a typical CC transaction there are FOUR sides: consumer, consumer’s bank (“Issuer”), Merchant, and Merchant’s bank (“Acquirer”). $MELI wants to the the Issuer AND the Acquirer; if they achieve this, their business scope will be the equivalent of Amazon, Shopify, PayPal, Square and Chase Bank
  4. $MELI has flywheels-within-flywheels! They have MORE flywheels than, I imagine, just about ANY company, ANYWHERE. Below are some examples.

Item #4 in this list IMO deserves it’s own paragraph(s):
Remember my past post in which I described the history behind the banking oligopolies in Brazilian banking? Well it turns out that the SAME factors (…wealthy elites closely connected to powerful politicians, suppressing competition, holdover from Colonial dynamics etc.) are in play for almost every macro-aspect of almost every LATAM country, INCLUDING (for instance) Transportation in Brazil.

…to wit: getting things delivered, to your doorstep, in a reasonable amount of time, in Brazil, historically has been a hair-pulling task. One that $MELI solved, by building out their own transportation network. Now BEFORE YOU SAY “yeah like Amazon did” PLEASE TAKE NOTE of these (IMO) extremely differentiating factors:

4a.) The National Postal Service in Brazil, at the time, was basically a combination Government monopoly + Mafia. To say that the NPS “fought” $MELI in its efforts to establish a Logistics arm is a huge understatement. The NPS fought hard, they fought dirty, they threw everything they had against Galperin ($MELI CEO), and…Galperin won. Leadership box CHECKED.

4b.) $MELI package delivery is a flywheel! Because: the difference in reliability and timeliness in getting packages delivered from $MELI vs. the NPS is such a HUGE difference that it drives traffic to! You can order from and get your stuff in two days, or you can get it somewhere else and the NPS will deliver it, whenever they get around to it. They’ll sometimes have your item at a post office, a mile away, and you’ll get it from there it…maybe 7-8 days.

4c.) I am therefore arguing that the Logistics stuff $MELI does is a MUCH bigger deal to its customers than Amazon Delivery is to folks in the USA, and the ramifications to $MELI’s revenue are a much bigger deal.

…well anyhoo. Here is a rough laundry-list of their flywheels:
A. All the data they collect drives good risk decisions for credit cards and Merchant loans
B. ecommerce drives Mercado Pago, which drives commerce OUTSIDE of Mercado Libre’s site
C. ecommerce drives marketplace (digital) ads
D. ecommerce drives interest payments from BNPL (…the MERCHANTS pay the interest!)
E. Logistics drives ecommerce!
F. Mercado Pago drives…Mercado Pago! (Seriously!)

  • see above list of the scope of Mercado Pago
  • customers using Mercado drives Merchants to offer it
  • Merchants offering Mercado Pago drives Customers to adopt it
  • QR Code payments drive 1)merchant fees, and 2)loan business from the merchants! (…I still need to do my homework on the QR-code business)
    G. In short, once $MELI acquires a Customer, that Customer has HUGE incentives to use not just, but to use the ENTIRE ECOSYSTEM: credit card, digital wallet etc.

Granted they have no equivalent of AWS.
Aside from AWS though, in terms of scope of operations, $MELI is + integrated online+offline payment solution+credit card issuer+digital wallet+BNPL provider

I have to double-check my notes, but the TPV is like 70% of total TPV, and is growing at a faster rate! That’s why $MELI is a Fintech that has a ecommerce site, not the other way around. And that’s directional too: off-marketplace was 27% of TPV in FY2016 and was 65% in FY21.

ALL THIS SUCCESS happened while (…according to Brazil’s per-capita GPD FELL 43% in the last 10 years! Does THAT address anyone’s fears that $MELI does business in LATAM! Mine are pretty squarely put-to-rest!

Are you worried that most of their revenue is from credit? Well let’s just note, then, that in the third quarter of 2022, its reported interest margin after losses (“IMAL”) was 37%! HOW IS THIS POSSIBLE? It’s possible because the banks in LATAM give their Customers a MUCH WORSE deal than that! Back to the dynamics in my post on $NU. This is why IMO it is worth the time to understand, a bit better, what the history, and the right-now, of what is going on in LATAM.

There is a lot going on in LATAM that can be capitalized on, because companies there are undervalued, because most folks don’t want to take the time to understand LATAM. I think it’s a golden opportunity!

And their mission statement addresses the dynamics I described in my post about Nubank:

" Our mission is to democratize commerce and financial services to transform the lives of millions of people in Latin America."

They aren’t just about money and being “customer centric”; they are driven to transform the financial lives of everyone in LATAM!

Here’s an example of how they are making it happen: Recently MELI scored a victory with import tax rates, exempting the first $50 of cross-border imports (critical to MELI) while enacting a general rate of 17% (…I could write an entire post about tariffs’ role in restricting competition in LATAM; throttling competition ultimately throttles GDP. The reduced tariffs are a step in the right direction, and $MELI made it happen).

Please accept my apologies for the disorganized nature of this post and for the lack of financial details. I’ll need some time to put together a more cogent post about $MELI.


I got a very polite answer from Remitly’s head of Investor relations yesterday about my question re the company’s cash flow profile, so closing the loop here and summarising his reply. He pointed me to their most recent 10K which I am also copying below. His answer:

There are certain markets in which we prefund transactions in anticipation of customer demand whether due to regulatory or contractual agreements with partners. Prefunding requirements are typically higher for weekends and holidays to ensure we have funds available for our customers.

About my questions about whether there has been public comments about when they will reach cash flow positive territory:

We have not commented specifically on timing of free cash flow positivity but we are currently profitable on an Adjusted EBITDA basis.

Extract about this from their 10K:

Disbursement Prefunding
The Company maintains relationships with disbursement partners in various countries. These partners are responsible for disbursing funds to recipients. The Company may maintain prefunding balances with thes disbursement partners so that they are able to fulfill customer requests. The Company is exposed to the risk of loss in the event the Company’s disbursement partners fail, for any reason, to disburse funds to recipients according to the Company’s instructions. However, historical losses for the disbursement funding accounts have been immaterial. The Company does not earn interest on these balances. The balances are not compensating balances and are not legally restricted.

→ This sounds part and parcel part of how they do business, i.e. not temporary timing differences. The fact that they have these balances is what makes them effective at getting payments to their customers quickly, which is in turn part of their competitive advantage. As the balances are not “compensating balances” and not restricted means they are not minimum requirements, so RELY can take them back when they want to. But they won’t because that is how they operate. These balances do seem to increase by less than the increase in Send volume, though, so should become less of a cash flow drag as the company scales further. It grew from end 2022 to end 2023 from $158m to $196m so up by 24% whereas Send volume grew 37% yoy.

Customer Funds Receivable
When customers fund their transactions using credit cards or debit cards, there is a clearing period before the cash is received by the Company from the payment processors of usually one business day. Similarly, when customers provide bank information and authorization for the Company to receive funds via electronic funds transfer, the transactions are submitted via batch and received in cash usually in one to three business days. These card and electronic funds are treated as a receivable from the bank until the cash is received by the Company. Included in customer funds receivable are amounts due from customers from the Company’s business-to-business remittance services.

→ Likewise, this sounds like simply part of their business model and not a timing thing only. They recognise the revenue before they receive the cash in some instances, and the difference sits as a receivable on the balance sheet. However any increase here will be made worse by public holidays/weekends as they have to wait for their money longer. Like with a normal debtors book they will work at improving this over time. This balance did grow a lot yoy, from $191m to $379m, or by 98% vs the Send volume growth of 37%.

My conclusion from this is that their business model requires investment in working capital and that those two balances above are the bulk of that. The amount invested in these two balances will increase over time, will be influenced by arbitrary things such as whether the end of the reporting period was over a weekend, and will be subject to them negotiating with the beneficiary on the other side of the transaction (i.e. who holds the cash for longer). As they grow, this part of their balance sheet will require more cash, but in steady state the impact should be zero/marginal.

I’m keeping my position.



Extremely helpful, @wsm007 , thank you!

I increased my position in RELY last month and now hold an 8.72% position.